We've gone over this ground before, and I know that BT vigorously defends the free market, as do I.........but the kind of conduct described in this article from today's Indy Star is not the free market at work. It's fixing prices at the retail level to make up for losses at the other end of the volatile oil market. Nice deal for the retailers. It certainly eliminates the risk normally inherent in the free market. http://www.indystar.com/apps/pbcs.dll/article?AID=/20090120/BUSINESS/901200321
.......retailers are free to set their prices at any level they deem in the best interests of their enterprise. If they are in fact acting in collusion and in a manner that eliminates competition and removes viable alternatives for consumers then that conduct is illegal and they should be prosecuted. A quick review of gas prices in Indy shows prices ranging from $1.77 a gallon at the Pilot on the corner of Whiteland Rd and I-65 to $2.05 at the Express Mart at Washington and Monroe ....a range of almost 20% for regular. The available evidence I found in 30 seconds on the web suggests that if they are attempting to collude, they need to communicate better because they are not doing a very good job. If I were the writer, I'd fill up at the Pilot station....if everybody did the same, the guys at Express Mart would figure it out...... The writer somehow missed the stations selling at $1.77.....if he doesn't like $1.95, he should drive to the next corner......obviously he has more of an agenda than he does investigative abilities.
Question... What are your thoughts of the tankers sitting offshore and refusing to unload their cargo waiting for prices to go up?
......there are those that have chosen to sit and there are those that have chosen not to sit. Those that have chosen to sit are taking a material risk with their assets which may or may not be rewarded. Parking a supertanker offshore is a pretty damn expensive undertaking......consider the day rate of the tanker, crew and inventory. The meter runs 24/7... It's not unlike the billions of dollars of real estate that has been taken off the market or not marketed at all in the hope that the recovery in prices will more than compensate them for the cost of carry and the risk of not.....
Sorry, BT. We'll have to agree to disagree on this topic. I'm not going to debate the difference between $1.77 and $1.95 as it relates to the bigger picture. We do agree on one thing, however:
Free market at work Sid....free market at work..... :lol: If we don't want to pay it at the pump we walk to work....simple. :lol:
A classic reason as to why it's a delight to have discussions with you on the forum.....grace and civility are great and wonderful things. I appreciate you Sid. That said....... :twisted: In all seriousness, while a difference of $0.28 per gallon - the highest of $2.05 and lowest of $1.77 - may not seem like much, in the retail gasoline business it is immense. The retail gasoline business in the US is a highly competitive business with GROSS (not bottom line) margins averaging only $0.12 per gallon and those margins have been decreasing steadily for over a decade. Indeed returns at the retail level have diminished to such a point that even Exxon with its available scale advantages decided this past year to exit the business due to poor returns. Consider that competitive pricing spread again in the context of a $0.12 average gross margin......the $0.28 spread is 2.5X the average margin. I can't think of many businesses where the price differential at the retail level is greater than twice the average gross margin. That is more than ample evidence to me that whatever collusive attempts that there may be, the pricing for gasoline at the retail level in Indy is still quite competitive - indeed cutthroat for the low man on the totem pole. The notion that the stations in Indy are collusion and that their behavior is anti-competitive, limiting viable alternatives for consumers and generating excess returns for themselves is not, imho, supported by the facts. As a practical matter, the retail gasoline business is a crappy business with very, very modest returns. But, as you suggested, we can agree to disagree and still be pals....
T, Good feedback, thanks. It is a growing concern here in the Gulf area as some SUGGEST there might be collusion to force the prices up by affected supply.. I just can't imagine someone wouldn't break the blockade and go get paid... Free market my man, free market.
I've said this before that when it comes to commodities that Americans are forced into needing for everyday life....and they have no choice....then practices such as fuel hoarding and/or gouging should be criminally prosecuted......or holding on to Tarp money....setting very high standards for loans in the meantime and then loaning out that government sourced hand-out money at exorbitant rates because of those jacked up credit standards should also be prosecuted. Maybe I am far off base on that but I'll bet not.
no question, illegal practices need to be prosecuted to the fullest extent of the law. I also don't believe that a vendor should be compelled to sell his product at a loss. A man is entitled to generate a profit and make a living.....
You know...if the local Jaguar dealer wants to sell you a Jag at a price that is 1.5 times over what the guy across town is selling one for then screw that local high-priced guy....and choose to go across town. Same thing if that close by dealer bought his Jag at a high inventory cost and to sell it at the same lower price as his cross town competitor would cause him a loss....so be it....you still have the choice to go across town and maybe he finds a sucker to pay his needed higher price. Too bad for the sucker but that is business. On things like gas for your car and electricity for your house...it's a whole different story.
OK. I lied. I'm jumping back in with a definition of oligopoly taken from Wikipedia. There are several sources of the definition if you don't like this one, but they all say essentially the same thing. I'm doing this in a positive sense to take the debate back to a more fundamental level of: free market or oligopoly?
The same is true for the retail gas business.....there is a helluva lot more gas dealers than car dealers, if a 16% price differential isn't enough for you to drive to the next station, I can't help ya. I would submit the following..... 1) 16% price differential between the high and low is a greater price differential than you'll find - under normal circumstances - between like models at your local Jag dealers 2) Your local Jag dealers operate on margins that would make any and all retail gas operators orgasmic....the likes of which they have not seen in their life times....ever. 3) If you truly believe that the retail gas dealers are hosing you, colluding to manipulate prices and garner excess profits, if I were you, I would immediately get into the retail gas business, undercut their prices and live happily ever after......best of luck to you in making a nickel on that prospect, but I wish you godspeed and outrageous success. If nothing else, you'd surely get firsthand knowledge on the real margins upon which these guys try and make a buck. As a practical matter and perhps little known factoid, the SOP of the mega-mart, convenience store, high volume gas retailers, many dispense fuel as a loss leader/below cost to generate store traffic for higher margin items....the retail gas industry awaits another morally outraged entrant with open arms. Best of luck....let us know how it works out for ya.
Speaking of the price of gas, how come it didn't go down today. After all, if you listened to the delusional left the president can control the price of gas. Why didn't BO wave his magic wand and lower the price. It couldn't be because he's taking care of his oil-producing cronies could it?
I would burn a whole tank of gas running around here trying to find a 16% gas price differential. You act like the lower price gas is across the street. I thought the problem here was not so much retail but Supertankers waiting offshore until the price had risen to their liking?
Here is a new tool Al Gore invented.....the internet. You can find it from your couch.... http://gasprices.mapquest.com/
BT, Relating to this conversation, let me tell you a humorous story about how I think. Because you cited Indy gas prices, let me tell you that we own a home in Fishers, a northern Indy suburb. We will move there full-time when I retire, likely at the end of this year. For now, we go down there on weekends to enjoy the families of 2 of our 3 kids (the 3rd lives in South Bend). Our son lives in Fishers and has 5 kids. Our daughter lives on the south side and has 4 boys. The lowest gas prices tend to be on the south side, usually about 3-5 cents/gal difference but sometimes as much as 10-15 cents. It's roughly 20-25 miles from our Fishers home to our daughter's home, about a gallon of gas. If I need gas, I will mentally calculate the price difference for the amount of gas I need and how it relates to the cost of a gallon of gas I will burn going back up north from my daughter's house. Most of the time, my calculations favor waiting until I get back north to fill up, even at the higher per gallon price. My wife just rolls her eyes when she hears me explain my reasoning. :lol: